Commercial banks: new donors of Belarusian economy

April 22, 2016 17:59

The National Bank orders commercial banks to assume partial liability for the losses incurred in connection with the devaluation and rising interest rates, thereby jeopardizing the financial system, which is not stable enough anyway.

Due to the rising cost of resources involved, including the rise of the refinancing rate, the National Bank encourages banks to review their interest rate policy on the credit market. The NBB press office reported that each bank was requested to develop a set of measures aimed to prevent the excessive burden on individuals repaying their loan debts to banks in both national and foreign currencies.

While reviewing interest rates on loans previously granted to natural persons the banks were recommended to use individual approach, taking into account the category of borrowers, assess the ability of an individual to perform his/her liabilities. For instance, the National Bank proposed to extend principal debt repayment, to extend the maturity (repayment) of a loan, to change the currency of a loan by additional agreement of the parties, to forgive penalties within the loan agreement. Also the NBB advised banks to suspend filing lawsuits concerning charges on property, inter alia, mortgage transferred to a loan agreement.

Comment

Therefore the authorities have found a new donor of subsidies to the population. In anticipation of autumn, when both, prices and costs will increase (heating season will start), part of the population would not be able to repay the loans. In order to mitigate the potential outburst of discontent the NBB requested the commercial banks (who are forced to increase interest rates on previously issued loans because of the rising refinancing rate) to use individual approach to borrowers and to provide discounts/respites to the poorest, etc. Therefore the National Bank charges losses from the increased cost of loans to banks. The authorities prefer the short-term benefits from such solution to long-term losses.